Ameeting of the Board of Governors of the Federal Reserve

SYstem was held in Washington on Thursday, March 10, 1938, at 11:30

a• m.

PRESENT: Mr. Eccles, ChairmanMr. Ransom, Vice Chairman

Szymczak

Mr. Morrill, SecretaryMr. Bethea, Assistant SecretaryMr. Clayton, Assistant to the Chairman

Consideration was given to each of the matters hereinafter re-

ferred to and the action stated with respect thereto was taken by the

Board:

Mr. Morrill reported that the Comptroller of the Currency to-

% issued a call on all national banks for reports of condition as at

the close of business on March 7, 1938, and that, in accordance with

the usual practice, a call was made on behalf of the Board of Governors

of the Federal Reserve Systan on all State member banks for reports

°f condition as of the same date.

The call made on behalf of the Boardwas approved unanimously.

Letter to Mr. Young, President of the Federal Reserve Bank of

Boston, reading as follows:

"This refers to your letter of January 20, 1938, inwhich you state that, anticipating that a loss would developon an advance made under Section 13b of the Federal Reserve

'Act, your bank set up a reserve to cover such loss in theamount of ;2,500 at the end of 1936; that after foreclosingand realizing upon all collateral held in connection withsuch obligation, and applying the proceeds against the

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"principal of such obligation and expenses incurred there-

with, there is an unpaid balance of 82,190.25; and that since

it has been found that no further recoveries are possible

from the obligor you ask the Board's authority to charge

off the amount of the loss, 2,190.25, less the portion of

the loss reimbursable by the participating bank, against the

reserve, 2,500, previously set aside for such purpose.

"Since the Board at the end of 1936 specifically ap-

proved setting aside a reserve of :$2,500 to cover an an-

ticipated loss on the advance, and since reserves set aside

for losses on industrial advances are considered in the

nature of valuation reserves, the Board considers that the

action which it took in practical effect constituted an ap-

proval of the charge-off of a loss not exceeding such re-

serve and you are at liberty to make the proposed charge-

off."In order that we may be fully prepared to furnish ade-

quate information regarding any such loss, the bank should

satisfy itself that its records reflect all the facts upon

which reliance is placed for justification of the reserve

set up for any such loss and the charge-off thereof, not

only in this but also in all other cases of advances made

under Section 131) of the Federal Reserve Act."

Approved unanimously, with the under-

standing that a copy of the letter would

be sent to the Presidents of all other

Federal reserve banks.

Letter to Honorable William J. Douglas, Chairman of the Securi-

ties and Exchange Commission, prepared for the signature of Chairman

Eccles, and reading as follows:

"I have your letter of February 16 in which you ask

for a list of the holding companies which headed up the

banking groups included in the group banking statistics

published in the February 1938 issue of the Federal Reserve

Bulletin."For convenient reference the definition of the term

'group banking' as used in the Bulletin article to which

you refer, and the definition of the term 'holding company

affiliate' contained in Section 2(c) of the Banking Act of

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"1933, are given in an accompanying inclosure. It will beobserved that the term 'group banking' excludes holdinr com-pany affiliations where only two banks are involved, andincludes some affiliations between three or more banks inwhich there is no 'holding company affiliate'. In some in-stances the group consists of the principal or dominant bankand of some other banks controlled by the principal bank orby an associated or subsidiary holding company or similarorganization. In other cases the holding company does notnecessarily control the banks by way of stock ownership butapparently does control their Policies in some other manneras, for example, in association with closely allied interests.In the case of the so-called banking groups that consist en-tirely of banks that are not members of the Federal ReserveSystem, detailed information as to the character of affilia-tions between such banks is not available at the Board'soffices. The special reports on group banking submitted tothe Board of Governors by the Federal Reserve banks werebased largely on reports of affiliates of member banks ren-dered pursuant to the provisions of the Banking Act of 1933,as amended, and on such other data with respect to affilia-tions between banks as came to the attention of the Reservebanks in connection with the examination of member banksor otherwise.

"The names of the 52 banking groups included in thestatistical analysis presented in the February issue of theFederal Reserve Bulletin are shown in the attached statement.You will observe that, in some cases, the banking group isdesignated simply by the name of the holding company whichappears to have direct or indirect control of all of thebanks in the group. In some other cases the group is des-ignated simply by the name of the principal bank, which ap-

pears to control or dominate, directly or indirectly, theother banks in the group. In other instances the name ofthe principal bank is shown in conjunction with the nameof the associated holding company.

"It is understood that the list of banking groups isdesired for use within the Commission and that it will notbe released without prior reference to the Board of Gover-nors."

Approved unanimously.

Letter to Mr. Sinclair, President of the Federal Reserve Bank

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et Philadelphia, reading as follows:

"Mr. Szymczak has brought to the attention of theother members of the Board your letter of March 5 regard-ing the payment of 4422.00 by the Federal Reserve Bank ofPhiladelphia to cover tuition fees of three of the bank'semployees attending the Graduate School of Banking atRutgers University and I have been asked to advise youthat the Board will interpose no objection to this payment,With the understanding that before further expenses areincurred beyond those authorized in the Board's lettersX-9829 and X-9729 the matter will be taken up with theBoard of Governors."

Approved unanimously.

Letter to Mr. Geo. C. Brainard, Class C Director of the Federal

Reserve Bank of Cleveland, reading as follows:

"Vie appreciate very much your thoughtfulness in ad-vising us as to your impression regarding the meeting inWashington on Wednesday, March 2nd, and your letter isbeing circulated to the members of the Board.

"The remarks of Mr. Eccles were extemporaneous andhe particularly asked that they be treated as 'off therecord' as he was responding to the requests of severalwho participated in the conference to give them the bene-fit of his views on the current economic problems to whichhe had been giving attention. His talk might perhaps be

characterized as in the nature of a discussion within the

family. For these reasons, I regret that I am not able

to send you a stenographic transcript."May I add that we felt that the privilege of meet-

ing with and hearing the views of the directors of the

Federal Reserve Banks on the question on the program was

most helpful."

APProved:

Approved unanimously.

Thereupon the meeting adjourned.

Chairman.

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